Dear Representative Bly

A very nice deck chair from the Titanic

Still a very nice deck chair from the Titanic

So, Senator Kevin Dahle’s tweet about LGA sparked a recent post and now my state representative David Bly’s newsletter has me blogging on a related issue.

Really, the issue is how can the public conversation begin to address the relationship between property taxes and their friends (LGA, tax relief of various kinds, business subsidies), the crumbling infrastructure and the services taxes must fund, and what spending decisions we can make to change this landscape for the better.  Perhaps Rep. Bly and Sen. Dahle understand these issues very well, but so far they are only choosing to write the quick and easy stuff for constituents.

Dear Rep. Bly,

Congratulations on your return to the legislature and thank you for your continued service. Just as I took your senate colleague Kevin Dahle to task over his tweet about increasing LGA in response to requests from district mayors, I’m writing to challenge you to consider and, even more important, talk about the larger picture.

In your weekly newsletter of February 8, you said:

I agree with the Governor on his assessment that we need to reduce property taxes. The consistent increase hits low and middle-income earners much harder. Middle class families have been squeezed too much in the last ten years. Wages have remained flat while the cost of living has steadily increased. Many Minnesotans are finding it harder to save for retirement and send their kids to college. As the Governor said, this is not the Minnesota we want to leave our children. We need Minnesota to be a state that invests in its people and provides quality, efficient services.

Your remarks indicate you are concerned about equity for middle and lower income families.  I agree, but question the strategy you endorse for achieving it.  As with my letter to your colleague Senator Dahle, I question whether you are going for the quick fix without even attempting to figure out how to improve the tax system in the longer term for a sustainable state budget.

In particular, the relationship among taxes, local government costs, and policy choices which have skewed the market and the landscape remains unexamined, but it is these structural issues which desperately need your attention. My vote in the next election for you or any politician depends entirely on your contribution to shifting the conversation from short term fix to sustainable policy.  In addition the issues I raised for Senator Dahle, I have these questions:

How regressive are MN property taxes?  A new report Who Pays? evaluates state tax systems for regressiveness; sales taxes are much more regressive than property taxes, but I urge you to take a look at Minnesota’s overall tax burden on its residents and how regressive it is.  Minnesota’s sales tax was created to fund property tax relief back in 1967; this seems like a very inequitable method for change.  Please also consider how previous legislatures have tried to shift the burden to commercial/industrial property with higher class rates and the state general tax; this shift creates superficial equity for homestead tax payers while imposing an obstacle to our economic drivers who, typically, require fewer city services.  Again, please evaluate how the system is balanced rather than simply reducing one component.

Property taxes, housing costs and location: The size of homes has been increasing since the 1950s and, as a result, so have the taxes.  Part of the housing and transportation cost equation depends on where we live relative to where we work, too.  Since your district has Northfield, Londsale and other communities which became more attractive to commuters to the metro area in the last decade, there are also many homeowners who pay a great deal in transportation plus housing.  “Drive ’til you qualify” may have yielded more house for the money for individuals, but also increased household costs. So, it is not too surprising to read that housing and transportation costs taken together are outpacing incomes.  If households are paying more of their income for housing and transportation, then property taxes will be more of a burden.  Before cutting taxes, think about how the incentives for more efficient and economical development can help reduce both government and homeowner costs.

How good is Governor Dayton’s plan?  I’m not impressed.  MinnPost’s Steve Dornfeld critiques the plan and finds 3 big issues: increased complexity (see the final report from the Property Tax Working Group, too), creating new inequities, and providing incentives for local governments to raise taxes in the future. I’d add that Gov. Dayton’s plan adds economic development policies which will continue to incentivize the race to the bottom which will continue to use tax dollars to lure business to Minnesota through tax abatement and infrastructure subsidies while also including new sales taxes for business services which follows the historical pattern of trying to offset property tax issues with sales tax.

As I said to Senator Dahle, I’m counting on your leadership to help develop policies which benefit all Minnesotans for the long term, not just the constituents yelling at you right now.  Of course, I also know that change happens incrementally as you work to build support and make compromises (and that’s just within the DFL) and that I am asking for a staggering amount of reform, but I am looking for you to shift the conversation away from reactive government to thoughtful, sustainable policy-making.  Good luck!


Betsey Buckheit

Dear Senator Dahle

With the power shift in the state legislature, I’m looking forward to the legislative session with a teeny tiny bit of hope and a whole lot of apprehension.  My apprehension level rose precipitously yesterday when I read my new state senator’s tweet (@KevinDahle) that he’d been meeting with a district mayor as part of working to increase local government aid.  Oh dear, Senator Dahle, but that’s starting at the wrong end of the policy process and so early in the session, too.

Dear Senator Dahle,

A very nice deck chair from the Titanic

A very nice deck chair from the Titanic

Congratulations on your election and the start of the new session!  As a recovering local government official, I know that the state legislature has a great influence on how cities can do their business. I write today to offer a few ideas about how the state could help rather than hinder local governments.  I encourage you (indeed my support in any future election depends on it) to look at the larger, longer term policy picture rather rearranging the deck chairs on the titanic ship of the state of Minnesota.

More than 20 years ago, the Citizens’ League published Remaking the Minnesota Miracle which studied the state/local fiscal system to determine what “realigning of responsibilities and revenue raising authority would have to occur” to finance state and local services and increase accountability.  Although the specific recommendations are interesting (the report calls for eliminating LGA), I hope you’ll consider the 4 principles for evaluating the fiscal system which seem very relevant and not time-bound:

Accountability: Responsibility for services should be assigned to the entity that is accountable to the electorate, the recipient of the service, and the governmental unit or persons paying for the service

Effectiveness: Responsibility for services should be assigned to the entity, public or private, that gets the job done well and measures for results.

Economy: Responsibility for services should be assigned to the entity, public or private, that can supply the service at the lowest possible cost.  For instance, in developed areas, water treatment and sewage facilities can be provided less expensively on a regional basis than on an individual city basis.

Equity: Responsibility for services should be assigned to the entities that can finance the service equitably and ensure equity in the delivery of services to all persons.

Certainly, almost any proposal will address some of these values strongly and others more tentatively or will demonstrate the tension between values.  Equity or accountability might strain economy, for example.  Still, these values can help think about what level of government or what private entity is best situated to deliver or fund services and, as a result, where decision-making control should reside.

I hope you have received a copy of the Property Tax working group’s report which also addresses what property taxes are intended to fund and to disentangle state control from local functions.  The history of the development of the property tax in Minnesota is well worth reading as “You may ask yourself, well, how did I get here?”

Finally, consider how other regulation affects the tax picture and how the state legislature can incentivize better spending strategies and foster innovation at the local level.

  • The “grow our way to prosperity” model must be reexamined to allow cities, counties and the state to maximize their existing investment in infrastructure rather than expanding infrastructure (and the obligation to maintain it) in the hope of attracting enough new business to pay for the existing system.  There is a burgeoning amount of data showing the cost of this strategy to local and state government.
  • Consider school siting philosophies which demand open space and favor new schools rather than renovation also make it harder for children to walk to school (adding busing costs and congestion).  
  • Think about how state government, with its larger scope, can help local entities work collaboratively (especially those outside the Metro Council’s jurisdiction) to deliver services efficiently and economically rather than pitting them against each other or forcing a sort of local protectionism.  We need to be able to develop shared solutions for transportation, land use, resource protection, and service delivery.
  • Transportation and infrastructure spending is a big deal at all levels of government.  Land use, environmental regulation, public health and quality of life are deeply intertwined with transportation policy; please try to see the whole landscape to make policy which helps local and state government invest wisely, support productive growth patterns, and build places where we want to live, work and invest time and effort.

Thanks for reading and I await your updates and other news of what’s happening in St. Paul.  I’m counting on your leadership to help develop policies which benefit all Minnesotans for the long term, not just the ones yelling at you right now.  Of course, I also know that change happens incrementally as you work to build support and make compromises (and that’s just within the DFL), but I am looking for the conversation to shift away from reactive government to thoughtful, sustainable policy-making.  Good luck!

Yours sincerely,

Betsey Buckheit